Have you ever heard of this kind of 'forbearance'?

Question

I have a loan question from a past client...(I am an agent).

They tell me today that someone approached them (a company from LA), that if they purposely not paying their mortgage for 3 months, the company can negotiate a better term and rate for them with their bank, so they can have lower rate (like 3%) and better terms....and they charge like 10k when it is done....

So...this is kinda of a 'forbearance',....however, the starting point is that they are PURPOSELY not paying mortgage instead of unable to.

Have you every heard anything like this ? Legal? or just a grey area and that company is just being creative of making money.... ?

V.G Jason · Answer

Why even bother entertaining this type of nonsense? It's fraudulent, you grab a quick buck to lose everything you have or had. The juice is not worth the squeeze. Just play within the rules.

Scott E. · Answer

When I worked at the bank in default prevention we processed modifications, deferments, and forbearances for clients. We're talking hundreds of thousands of clients. This was back around 2011-2013 though when these programs were much more common.

Back then there were a couple of these types of companies who would "assist" clients through the process. Not a bad service considering it was quite confusing and overwhelming for a lot of borrowers to navigate a loan modification or forbearance.

I have no experience with this ocean park financials group. Never even heard of them. I googled them and they surprisingly have half decent reviews link. But I'd take that with a grain of salt.

All that being said, the others in this thread are right. No 3rd party company should be advising a borrower to stop making their payments in order to get approved for one of these products. IF the borrower was already delinquent and they reached out to this company for help, the company only then should hold their hand throughout the forbearance or modification process.

If your client is having a hard time making their mortgage payments, I recommend they reach out to their loan servicer and ask for assistance. Anything a 3rd party can "offer" will also be available directly through the servicer.

Jane Ho · Answer

Love your rule of thumb!!!!

Chris Seveney · Answer

@Jane Ho

During covid there were loan forbearances being modified down to 2%. Those days are gone so they are probably using that as a scam to say “see we did this”

Most loans are securitized and in pools and investors are buying those securities and servicers can be on the hook.

As a rule of thumb

Any person who ever tells you to intentionally break a contract is not someone you should associate with

Jane Ho · Answer

Thanks all. The company is call ocean park financials....I googled them....didn't find any useful info. my client bought this house with me this Jan, with a 6.5% rate and they want low....I mean LOWER rate....I feel it is totally fishy and like a scam but I dont process loans so I don't have a firm answer for them. Thank you all for the info I will tell them don't do it :)

Bill B. · Answer

You’d have to have zero or near zero equity, otherwise they foreclose, charge a bunch of interest and penalties, and take it out of the sale. You get to be homeless or a renter with bad credit. Seems like the kind of “company” CA would have laws against, taking advantage of the stupid & poor.

Ps. I bet they didn’t even ask what the current rate was when they said they could lower it. It obviously couldn’t be a recent mortgage or they wouldn’t be able to adjust the term and they’re promising to make both better.

Jake Andronico · Answer

@Jane Ho

This sounds extremely bad... have not heard of anything like this but it sounds like somebody trying to make a business off of a one-off experience that shouldn't be done or replicated.

Sad to hear, and so many red flags. I hope your past clients understand the risks.

I respect you for reaching out to the forums and asking.

Have you ever heard of this kind of 'forbearance'?

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